E-File Returns Running at Record Pace

E-File Returns Running at Record Pace

IR-2007-74, March 30, 2007 WASHINGTON — The Internal Revenue Service announced today that taxpayers are continuing to electronically file their tax returns at a record pace, up almost 6 percent from the same period last year. “Taxpayers can rely on e-file as a safe, accurate way to quickly finish their taxes and get a refund,” said IRS Commissioner Mark W. Everson. “We encourage people to consider e-file and Free File as the tax deadline approaches. For those who haven’t filed, they should make sure to request the telephone excise tax refund if they are eligible.” According to the new filing season statistics for the week ending March 23, 2007, one of the biggest areas of growth is in returns electronically filed from home. Self-prepared e-filed returns have grown more than 8 percent from last year. E-filed returns from tax professionals have climbed almost 5 percent. So far this tax filing season, almost 72 percent of all returns have been e-filed, compared to 68 percent for the same period last year. As of last Friday, 29 percent of e-filed returns were filed by people using their home computers, up from 28 percent of e-filed returns for the same period last year. Also, more people than ever before are opting to have their refunds directly deposited. So far this year, the IRS has directly deposited almost 45 million refunds, or 71 percent of all refunds issued this tax filing season, up from almost 69 percent of the total for the same period last year. People are visiting the IRS Web site at IRS.gov in record numbers. The IRS has recorded more than 97 million unique visits to IRS.gov this year, up from about 89 million for the same period last year, an increase of almost 9 percent. Meanwhile, this year’s filings still show that about three in 10 tax returns are not requesting the one-time telephone tax refund. Although some of these taxpayers may not be eligible, others may qualify and not know it. The IRS urges taxpayers to check their eligibility for this special refund by visiting the Telephone Excise Tax Refund section on this Web site. The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the 3 percent federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service. Of those requesting the telephone tax refund, 99 percent are choosing the standard amount, and the rest are basing their request on the actual amount of tax paid. The standard amount ranges from $30 to $60 and is based on the number of exemptions taxpayers are eligible to claim on their return. Alternatively, taxpayers can request a refund based on the tax shown on their phone bills and other records. Taxpayers can request the telephone excise tax refund, as well as file their entire tax return electronically, for no cost using the IRS's Free File program. Seventy percent of Americans are eligible for the Free File program because they earn an adjusted earned income of $52,000 or less. Free File can only be accessed through IRS.gov. On the home page, click on "2007 Free File" and follow the directions. 2007 FILING SEASON STATISTICS Cumulative through the weeks ending 3/24/06 and 3/23/07 Individual Income Tax Returns 2006 2007 % Change Total Receipts 73,438,000 74,150,000 1.0% Total Processed 69,196,000 70,529,000 1.9% E-filing Receipts: TOTAL 50,296,000 53,145,000 5.7% Tax Professionals 36,268,000 37,942,000 4.6% Self-prepared 14,028,000 15,203,000 8.4% Web Usage: Visits to IRS.gov 89,246,000 97,102,000 8.8% Total Refunds: Number 61,660,000 62,951,000 2.1% Amount $144.513 Billion $152.801 Billion 5.7% Average refund $2,344 $2,427 3.6% Direct Deposit Refunds: Number 42,252,000 44,779,000 6.0% Amount $113.414 Billion $124.101 Billion 9.4% Average refund $2,684 $2,771 3.2% Related Items: e-file Tax Tip 2007-19, Receive Your Refund Faster with Direct Depoist Telephone excise tax refund Free File

IRS Issues Regulations on Transactions Designed to Artificially Generate Foreign Tax Credits

IRS Issues Regulations on Transactions Designed to Artificially Generate Foreign Tax Credits

IR-2007-73, March 29, 2007 WASHINGTON — The Internal Revenue Service and Treasury Department today announced the release of proposed regulations that would disallow foreign tax credits for foreign taxes purportedly paid in connection with certain artificially engineered, highly structured transactions. Foreign tax credits are designed to relieve U.S.taxpayers from double taxation of their foreign source income. Transactions addressed by the regulations, in contrast, are structured so that a U.S.taxpayer voluntarily subjects itself to foreign tax where an ordinary business transaction generally would result in little or no foreign tax paid by the U.S. taxpayer. “The proposed regulations complement the vigorous enforcement efforts of the IRS to identify and, in appropriate cases, to challenge the tax benefits claimed in these foreign tax credit generator transactions under principles of existing law,” said IRS Chief Counsel Donald L. Korb. The significant impact of these transactions on the U.S.tax base was brought to the attention of the IRS by members of the Joint International Tax Shelter Information Centre (JITSIC). JITSIC is an information exchange arrangement under which the US, the UK, Canada and Austrailia exchange information bilaterally on tax avoidance schemes. The IRS is aggressively pursuing cases uncovered through JITSIC or other sources involving inappropriate claims of foreign tax credits. Foreign tax credit abuse is among the IRS’s top compliance concerns for large corporate taxpayers.

IRS Encourages Taxpayers to Take Advantage of Overlooked Tax Benefits

IRS Encourages Taxpayers to Take Advantage of Overlooked Tax Benefits

IR-2007-72, March 29, 2007 WASHINGTON — The Internal Revenue Service today urged taxpayers to take a moment before they file their income tax returns to be sure they do not overlook several important benefits to which they may be entitled. “Many taxpayers are missing out this year on the special telephone excise tax refund and other benefits such as the Earned Income Tax Credit,” IRS Commissioner Mark W. Everson said. “If you don’t claim it, you don’t get it. That’s money down the drain for millions of Americans.” In addition to the telephone excise tax refund and the Earned Income Tax Credit, many taxpayers also overlook free services available to them, such as free tax help and the Free File program. Still others lose out by not filing a return. Even if a taxpayer does not owe tax and is not required by law to file a return, he or she may miss out on a refund or tax credit that is available. Following are five refunds, credits or services that taxpayers frequently overlook: Telephone Excise Tax Refund –– This is a one-time refund of long distance excise taxes available on 2006 income tax returns. The refund applies to charges billed from March 2003 through July 2006. The IRS offers a standard refund amount of $30 to $60, or taxpayers can calculate the actual tax paid. Even if the taxpayer does not normally have to file a return, Form 1040EZ-T can be used to request this refund. Businesses and exempt organizations can also request it. Taxpayers can visit IRS.gov for more information on this special payment. IRS Free File –– Nearly 20 companies are offering free electronic filing to taxpayers whose 2006 adjusted gross income was $52,000 or less. That means 70 percent of all taxpayers, 95 million individuals, can take advantage of the IRS-sponsored Free File program. A link to Free File offerings is located on the IRS.gov homepage. Earned Income Tax Credit –– Earned income of less than $39,000 in 2006 may qualify a taxpayer to claim the earned income tax credit. This credit could be worth up to $4,536. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return. An electronic special “EITC Assistant” is available on IRS.gov to help taxpayers determine whether they are eligible. Taxpayers can access more information on this credit by visiting IRS.gov and clicking on “1040 Central.” Free Tax Help –– Tax help sites in libraries, churches, community centers and other locations are staffed by trained volunteers. Taxpayers who earned less than $39,000 and file a simple tax return can call 1-800-829-1040 to locate the nearest Volunteer Income Tax Assistance Program site. In addition, senior citizens can take advantage of the free IRS Tax Counseling for the Elderly program by calling 1-800-829-1040 or AARP’s Tax-Aide counseling program at 1-888-227-7669. Unclaimed Refunds –– Refunds totaling approximately $2.2 billion are waiting for approximately 1.8 million people who failed to file a federal income tax return for 2003. In order to collect the money, a return for 2003 must be filed no later than April 17, 2007. The IRS estimates that half of those who could claim refunds would receive more than $611. In some cases, individuals had taxes withheld from their wages, or made payments against their taxes out of self-employed earnings, but had too little income to require filing a tax return. Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). Taxpayers who need help also can call the IRS help line at 1-800-829-1040. Links: Telephone Excise Tax Refund IRS Free File Earned Income Tax Credit Free Tax Help Unclaimed Refunds

Jenkens & Gilchrist Admits It Is Subject to $76 Million IRS Penalty

Jenkens & Gilchrist Admits It Is Subject to $76 Million IRS Penalty

IR-2007-71, March 29, 2007 WASHINGTON — The Internal Revenue Service today announced that it has reached a settlement with the law firm of Jenkens & Gilchrist, which agreed that they are subject to a penalty of $76 million. The penalty stems from the firm’s promotion of abusive and fraudulent tax shelters and violation of the tax law concerning tax shelter registration and maintenance and turnover to the IRS of tax shelter investor lists. “While it is unfortunate that the 56-year-old national firm of Jenkens & Gilchrist is terminating its legal practice, this should be a lesson to all tax professionals that they must not aid or abet tax evasion by clients or promote potentially abusive or illegal tax shelters, or ignore their responsibilities to register or disclose tax shelters,” said IRS Commissioner Mark W. Everson. “Pursuing abusive tax shelters is a top priority for the IRS.” The firm aggressively marketed potentially abusive tax shelters to high-net-worth individuals. Some of the packages marketed to these individuals included listed transactions such as COBRA (Currency Options Bring Reward Alternatives); BEST (Short Option/Basis Enhancing Securities Transaction); BLISS (Basis Leveraged Investment Swap Spreads); OPS (Option Partnership Strategy); BEDS (Basis Enhancing Derivatives Structure); and BOSS (Bond & Option Sale Strategy). The firm also marketed two transactions that are not listed transactions — HOMER (Hedge Option Monetization of Economic Remainders) and BART (Basis Adjustment Remainder Trusts). The agency estimates that 1,400 investors are affected by the firm’s advice and will owe interest and penalties on their underpayment of tax. Jenkens & Gilchrist, which was once a 600-lawyer national firm, is in the process of winding down its legal practice and business affairs. The national law firm of Jenkens & Gilchrist is composed of a corporation in Dallas, Texas; a corporation in Chicago, Illinois; a partnership in Los Angeles, California; and a partnership in New York City. Related Items: Department of Justice news release [PDF] Abusive Tax Schemes Compliance & Enforcement

Many Cell Phone Customers May Be Overlooking Telephone Tax Refund; Before You File, See if You Qualify, IRS Advises

Many Cell Phone Customers May Be Overlooking Telephone Tax Refund; Before You File, See if You Qualify, IRS Advises

IR-2007-70, March 27, 2007 WASHINGTON — Many cell-phone users appear to be overlooking the telephone tax refund in the mistaken belief that this one-time refund only applies to land-line customers. According to the Internal Revenue Service, most cell-phone users qualify for the federal telephone excise tax refund. In most cases, the refund is also available to land-line, fax and Internet phone customers as well. The method of phone signal transmission does not affect the refund. The telephone-tax refund can add $30 to $60 — or even more — onto a taxpayer’s refund. “Many taxpayers are overlooking this special refund and the chance to get a bigger refund,” said IRS Commissioner Mark W. Everson. “We encourage taxpayers to spend a few extra minutes reviewing their tax return to make sure they are making an accurate request. A little extra time can mean a bigger refund check.” The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. The tax continues to apply to local-only phone service. Federal officials also authorized a one-time refund of the three-percent tax collected on long-distance or bundled service billed after Feb. 28, 2003, and before Aug. 1, 2006. Bundled service is local and long-distance service provided under a plan that does not separately list the charge for local service. Bundled service includes, for example, phone plans that provide both local and long-distance service for either a flat monthly fee or a charge that varies with the time for which the service is used. It is the type of service provided by many cell-phone companies. “We want all taxpayers entitled to this refund to get it, whether they are using a tax preparer or doing the return themselves,” Everson said. So far this year, about three in 10 tax returns received by the IRS are not requesting the telephone-tax refund. If you paid the tax and haven’t filed yet, here are some tips to help you figure the refund correctly and get it quickly: Consider using the standard-refund amount. About 99 percent of returns requesting the telephone-tax refund are choosing the standard amount. Though the standard amount is optional, it is easy to figure and approximates the eligible amount for most telephone customers. You only have to fill out one line on your return, and you don’t need to present proof to the IRS. The standard amount, ranging from $30 to $60, is based on the number of exemptions you can claim on your return. If you can be claimed as a dependent on someone else’s return, you cannot use the standard amount. If you paid more than the standard amount, you may figure your refund using the actual amount of tax shown on your phone bills and other records. Base your refund request on the three-percent federal tax paid, not the total phone bill. Do not count tax paid on local-only service. You must have the phone bills or other records adequate to support the amount you are requesting. These documents should not be sent along with the refund request but should be retained in case the IRS questions the amount requested. If you’re not sure whether you paid the tax, check the portion of your telephone bill that relates to long-distance or bundled service. Service providers use a number of different terms to identify the tax. Phrases to look for include: English-language phone bills: Federal, Federal Excise 3%, Federal Excise @ 3%, Federal Excise Tax, Federal Tax, Fed Excise Tax and FET; Spanish-language phone bills; Impuesto Indirecto Federal and Impuesto federal. Typically, this federal tax amount is not commingled with any other tax or surcharge on a customer's bill. In other words, it is normally shown as a separate line item. Do not file duplicate requests. If you file a regular income-tax return, do not file Form 1040EZ-T. Designed exclusively for requesting the telephone-tax refund, this simple form is for people who don’t need to file a regular income-tax return. If you want to take advantage of the earned income tax credit for low and moderate income workers, the child tax credit or other tax breaks, file a regular return and include your telephone-tax refund request on that return. File electronically. Electronic-filing software flags often overlooked tax breaks, such as the telephone-tax refund, and helps you figure them accurately and report them properly. If you use a professional tax preparer, ask that person to e-file your return. E-file for free. If your income is $52,000 or less, use the Free File link on IRS.gov to connect to a private-sector company offering free e-file services. Choose direct deposit. Whether you file electronically or on paper, you can get your refund at least a week sooner by having it deposited directly into your checking or savings account. If your income is low and you prefer having someone else prepare your refund request, you can get free help by visiting one of more than 12,000 neighborhood tax-assistance sites nationwide. Trained community volunteers fill out telephone-tax refund requests and basic income-tax returns for low-income people and senior citizens. To locate the nearest volunteer tax-help site, call AARP at 1-888-227-7669 or the IRS at 1-800-829-1040. If you already filed your return but failed to request the telephone-tax refund, you can file an amended return using Form 1040X. This form, available on IRS.gov, cannot be e-filed; it must be filed on paper. To avoid delaying a refund request, mail your completed Form 1040X at least three weeks after you filed your original return (if it was e-filed) or at least eight weeks later (if filed on paper). Stay away from tax preparers who falsely claim that many, if not most, phone customers can get hundreds of dollars or more back under this program. Use the Telephone Excise Tax Refund section on the front page of IRS.gov. Here, you can download forms, find answers to frequently-asked questions and link to participating Free File partners. Related Item: Telephone Excise Tax Refund

Williams Will Head IRS’ ETA Office; Holland to Direct EITC Program

Williams Will Head IRS’ ETA Office; Holland to Direct EITC Program

IR-2007-69, March 26, 2007 WASHINGTON — The Internal Revenue Service today announced the appointment of David R. Williams as Director, Electronic Tax Administration and Refundable Credits. Reporting to Williams and focusing entirely on administration of the Earned Income Tax Credit program will be Debra Holland, Director, EITC. Williams most recently served as the IRS Director in charge of the Earned Income Tax Credit, Health Coverage Tax Credit and Telephone Excise Tax Refund programs. He will maintain responsibility for those programs in his new capacity as he assumes the responsibility for Electronic Tax Administration including its e-file, e-services and internet programs. “We’re very fortunate to have someone with David’s expertise and background to take over this very important program,” said IRS Commissioner Mark W. Everson. “He has the knowledge and experience to bring together the private sector to work with the IRS to achieve significant advances in our shared goal of effective electronic tax administration. We see this move as a step forward for both the program and the IRS as a whole.” The Electronic Tax Administration Office (ETA) is responsible for all aspects of the growing exchange of electronic information between the IRS and individual taxpayers, businesses and practitioners. This includes the IRS e-file program now used by most taxpayers, the IRS.gov web site, and the development of additional electronic interactions with taxpayers and tax practitioners. Prior to joining the IRS in 1998 as Chief of Communications and Liaison under IRS Commissioner Charles O. Rossotti, Williams was a Deputy Assistant Secretary with the Department of the Treasury and had worked on Capitol Hill. He holds a Master of Public Policy from the John F. Kennedy School of Government at Harvard University, and a Bachelor of Science in Business Administration from Colorado State University. Holland most recently served as the Director, Pre-Refund Program Office, and she previously served as the Director of Business Systems Planning within the Wage and Investment Operating Division. Holland has held top-level positions in the IRS Joint Operations Center and Accounts Managements organizations. “Debra brings a unique blend of business management and technology expertise to the position that will serve her well as she oversees the important EITC program,” said Richard Morgante, Commissioner of the IRS Wage and Investment Division. As Director of EITC, Holland will balance the IRS’s nationwide outreach aimed at ensuring that every eligible taxpayer receives the credit with the equal responsibility to ensure that only those eligible for the credit receive it. Williams and Holland are working to ensure a smooth transition. The moves will be effective later this year. Related Items: Telephone Excise Tax Refund Earned Income Tax Credit Health Coverage Tax Credit Electronic Tax Administration/e-file

IRS Announces Enhancements to Online Payment Agreement Application

IRS Announces Enhancements to Online Payment Agreement Application

IR-2007-68, March 23, 2007 WASHINGTON — With the filing deadline approaching, the Internal Revenue Service today announced enhancements to the interactive Online Payment Agreement application on IRS.gov. The Web-based application allows eligible taxpayers or their authorized representatives to self-qualify, apply and receive immediate notification of approval for installment agreements – including paperless direct debit agreements. Two recent enhancements provide added functionality. The first permits individuals who have not yet received a bill to establish pre-assessed agreements on current tax year Form 1040 liabilities. The second allows practitioners with valid authorizations to remain in the application to request agreements for multiple clients. The IRS estimates that over 75% of those eligible for an installment agreement can establish one using this application. Since launching in October, about 3,000 taxpayers have successfully used it to set up a payment agreement with the IRS. Paying taxes on time and in full avoids unnecessary penalties and interest. However, taxpayers who cannot pay in full may request a payment agreement. To be eligible, a taxpayer must first file all required tax returns and be current with estimated tax payments if applicable. Individuals with a balance due notice can access the application using the following information: Taxpayer identification number (generally a Social Security Number) and Personal identification number, which can be established online using the caller identification number from the balance due notice. Individuals who have not yet received a bill must provide the following information to establish pre-assessed agreements on current year returns: The balance due shown on the return Taxpayer identification number Spouse’s taxpayer identification number (if applicable) Date of birth Adjusted Gross Income from last year’s income tax return Total tax from last year’s income tax return. Three payment options are available when applying online: Pay in full — Taxpayers who pay within 10 days save interest and penalties. Short-term extension — Receive a short-term extension of up to 120 days. No fee is charged, but additional penalties and interest will accrue. Monthly payment plan — A user fee will be added to the amount owed, and interest and penalty will continue to accrue on the unpaid balance.User fees are $105 for non-direct debit agreements and $52 for direct debit agreements. A reduced fee of $43 is available for individuals with income at or below certain levels. To access the application, use the pull-down menu under “I need to...” on the front page of IRS.gov and select “Set Up a Payment Plan.” The application is available Monday through Friday from 6 a.m. to 12:30 a.m., Saturday from 6 a.m. to 10 p.m. and Sunday from 4 p.m. to midnight (all are Eastern Time). Related Item: Set Up Payment Plan